The US Supreme Court set up the first potentially serious roadblock to the Obama administration's plans for restructuring the American auto industry, halting the sale of Chrysler to Fiat of Italy, which had been scheduled to go ahead yesterday afternoon.
In a single sentence order, Justice Ruth Ginsberg dismissed the administration's appeals that the sale be delayed no further, sowing confusion about how long the country's highest court might take to examine the deal.
The sale of the core Chrysler business to Fiat is at the heart of Barack Obama's plans to save the automaker from liquidation, something which the administration's lawyers argued is inevitable if the Italians walk away. Under the terms of the agreement, the deal must be completed by 15 June.
Fiat will emerge with management control and with an initial 20 per cent ownership of Chrysler under the deal, hammered out ahead of the bankruptcy filing at the end of March. A union-run healthcare trust will own most of the company, while unsecured bondholders will get only a sliver. Mr Obama condemned hedge funds holding the bonds for refusing to sign up to the deal, but a trio of Indiana state pension funds continued to try to block it.
They lost in bankruptcy court, and in an appeals court ruling last Friday, but were given permission to pursue the matter at the Supreme Court. They argued that the interests of unsecured bondholders had illegally been placed behind those of the union.
Justice Ginsberg gave no guidance on the length of time the stay might be in place, or whether the Supreme Court will definitely examine the bondholders' grievances. The rulings of the bankruptcy judge allowing the sale "are stayed pending further order of the undersigned or of the court", she wrote.Reuse content